Breaking down the barriers: what TPP means for exporters

The Trans Pacific Partnership has been variously described as a devil's pact allowing nasty corporations to sue or a panacea for those seeking to boost the country's trade and investment. Wherever the truth lies we should take notice of free trade agreements. David Williams reports.

In a spartan meeting room at a Zurich YMCA in 1998, the New Zealand wine industry hit a crossroads.

Six years earlier, the industry decided its future lay overseas and it was time to get serious about international trade and market access.

But it hit a brick wall in the form of the European Union.

The juggernaut was inherently protectionist and its regulations were designed to enshrine and enhance the status quo: EU domination.

In that plain Swiss meeting room in the northern hemisphere summer, a bunch of "new world" nations planned their assault.

Around the table were industry boffins and government representatives from New Zealand and its biggest competitors: Australia, Argentina, Brazil, Canada, Chile, South Africa and the United States.

Their belief was working together for consistent trade rules - under the grandiose banner "World Wine Trade Group" - would undermine the EU's stranglehold. They were right.

They jointly lobbied forums such as the World Trade Organisation, World Customs Organisation and Apec and signed two treaty-level agreements.

Now, wine can be produced here, to New Zealand rules, and sold into other participating countries under a single label.

New Zealand Winegrowers chief executive Philip Gregan says that might not sound like much, but it has been a huge advantage for an industry bedevilled by a minefield of "mind-boggling" regulatory rules.

New Zealand's wine exports in 1998 were about $100 million. Now they're almost $1.2 billion a year, making it the country's ninth-biggest export.

"We have been successful in not only boosting trade within the group, but we forced EU to change its own wine regulatory regime," Mr Gregan says.

"That meeting in the middle of nowhere has had profound implications for our industry, and it represented very much the end of one road and the beginning of another."

He says free trade deals have the potential to more than double the value of exports over the next decade or so.

For wine growers, TPP is not about better access to the US - a country which takes $250m a year in New Zealand wine exports.

It's about the "big game" of getting its products into the vast new and growing markets of Asia.

Mr Gregan says with TPP it's more important to think about the future shape of global trade - not the countries involved. After all, New Zealand's prosperity depends on exports and an intimate connection to global markets.

"A rules-based system is incredibly important for a small country with little or no power, and small industry."

That's the New Zealand picture. The US view seems more nuanced and strategic, against the background of free trade deals from which it has been excluded.

With the Doha round of multilateral trade negotiations at an impasse, the TPP is the US's only active trade negotiation.

Jeff Schott, a senior researcher for Washington's Petersen Institute for International Economics, describes TPP as "the most significant trade initiative in the 21st century" and says it is the model for prospective new talks with the EU.

His surprising conclusion is that the TPP is ultimately about China.

China isn't one of the nine countries in TPP talks and is not even one of three others - Japan, Canada and Mexico - who have formally asked to join.

But it will become involved should the deal be expanded to include the whole Asia-Pacific, one of the stated ambitions of the talks.

"China's not at the negotiating table but everyone at the negotiating table is thinking about China," Mr Schott says.

"It's important that we use the TPP effectively not to contain China but provide a means to better compete and co-operate with China."

China's interest is affirmed by cheif New Zealand TPP negotiator David Walker.

He told NBR ONLINE: "I think China's very interested to see and understand what's going on in this process and we talk to them about it, like we talk to a number of other economies around the region.

"This exercise is seen as a possible pathway towards the broader ambiition of trade area of the Asia-Pacific region, in Apec.

"China is a part of that and I'm sure all participants would want China to be participating in that at the time when it is ready to do so."

Mr Walker says there are enormous opportunities for US agriculture in Asian markets if the right trade model is agreed.

The 'two by four across the head' that woke the US up

Mr Schott says it took a "proverbial two-by-four across the head", in the form of a EU free trade deal with Korea, to "knock some sense into our politicians" over trade.

There is now broad support in Congress for TPP, in response to what he calls "widespread regionalism" and "discriminiation" against the US in Asia.

US President Barack Obama states he wants to expand TPP, a move which puts Asia-Pacific at the forefront of its foreign policy.

The TPP has been mentioned in the same breath as the US's five-year goal of doubling exports by the end of 2014, but it is unlikely to have any effect until after then.

The US seems to be getting serious about the Asia-Pacific, something Foreign Minister Murray McCully says might be good for New Zealand.

"As the US is intent on becoming more engaged in the Asia-Pacific region and engaging with China, I believe we can play a very useful role.

"It's possibly not so well known that the US greatly values some of the skills and experiences that New Zealand has because of the particular relationship we have with China, and seeks the opportunity to talk to our people to make sure that they're well equipped for their own engagement.

"We're uniquely placed as a country that has such a strong relationship with China and which has an evolving but very strong relationship with the US on so many different fronts."

A chasm or part of the negotiating process?

The latest round of TPP negotiations kicked off in Dallas, Texas, earlier this week.

The talks have been given extra heat by an open letter from lawyers - including those in New Zealand, Australia and the US - calling for foreign investor protections under "investor-state" disputes to be dropped.

US business representative Cal Cohen told the NZ US Council conference a "chasm" had opened between political ambitions for an Asian-Pacific free trade deal and the countries' negotiators, and there is deep concern at the state of negotiations.

However, Mr Walker dismisses the divergent views as being a natural part of the negotiation.

"There's a lot of tough issues in there and there's a lot of different perspectives at the table, reflecting the range of views that exist around nine parties.

"But that is a part of a negotiating process and what you do is you work through those issues gradually reach some sort of accommodation/consensus/landing zone that is capable of being seen in the common interest."

Prime Minister John Key says agriculture must be part of any deal.

However, Mr Walker says it is highly unlikely there will be open markets in all areas from "day one" - especially with something as thorny as agriculture.

"When you're looking at the more sensitive areas for market access ... the way we have always looked to deal with that is some sort of phased market opening."

Asked what the chances are of a deal being signed by Christmas, Mr Walker dodges, and replies: "I'm not a betting man."

Will TPP dilute the benefits of New Zealand's free trade agreement with China? Mr Walker says this country has never viewed trade deals as exclusive preference walls.

"We've always looked at them as agreements which are designed to build and open to others over time because that's the whole rationale for the FTAAP [Free Trade Area of the Asia-Pacific] and, ultimately, Geneva.

Basically, these deals benefit everybody and the more people involved, the better.

That seems to fit with the ideals discussed at the Zurich wine meeting. Since 1998, Mexico has joined the group.

Mr Gregan says: "Without such a rules-bases system, New Zealand as a small, isolated country will inevitably lose its way in the world and the social, environmental and economic goals we have for this country will be far beyond our reach.

"From our experience, we know that working with like-minded parties on the big picture, with countries like the United States, we can achieve great things that we could never achieve by ourselves."